Entire competitive bid scrapped

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Ontario Hydro has killed its much delayed 120 MW request for renewables proposals, the centrepiece of its "Renewable Energy Technology" (RETs) programme. Wind and other independent renewable developers who were expecting announcement of the winning bidders are bitterly disappointed.

The decision to terminate the request for proposals (RFP) was taken by Ontario Hydro's senior management in December, but not make public until late January. The Independent Power Producers' Society of Ontario (IPPSO) is concerned the decision was reached by senior management and not the board. In August 1994, the entire Hydro board approved Round 1 of the RFP, for 50-60 MW, and an overall RETs budget of C$120 million.

The RFP appeared to be in trouble late last year when Hydro began to solicit interest from consumers in buying green power at a premium. Prior to that, Ontario Hydro's former director of environment and sustainable development (ESD,) Brian Kelly, had recommended that ten projects go ahead, including two medium scale wind plants (10-22 MW). Now the ESD group has been disbanded and Kelly is with the corporate strategies group under Ontario Hydro vice president Rod Taylor.

The average price of wind power bid into the RFP -- from individual wind turbines and wind plants -- was C$0.12/kWh or more, with the various wind projects ranging from C$0.11 to C$0.16/kWh. "These prices were very, very high," says Taylor, who notes that Ontario Hydro's current "incremental system cost" is only C$0.03/kWh. The electricity purchase costs were an "awful lot of money" to pay for 20 year contracts, he says, even after considering bids from medium wind plants (whose evaluation was delayed for about a year for wind measurements). "[W]e have decided not to move ahead on the recommended set of RETs RFP projects, because of the cost and potential asset stranding implications," wrote Taylor to IPPSO president Tom Brett on January 28.

"This is a huge setback for the renewables industry and for Hydro," says Brett. "I can't see how either the federal or provincial governments can meet their long term environmental targets without this key programme component." IPPSO director Jeff Passmore, who also heads the Canadian Wind Energy Association, advised Hydro on the programme at its inception. "We told [Ontario Hydro] in the beginning that it was a bad idea to focus on small projects because the price would be too high. Now Hydro would like to end the projects because the price is too high," he says.

However, Brian Cappe of the consumer energy agent EnerShare Technology Corp says his firm has "customers prepared to buy green power at the going prices, but Hydro has always refused to allow the power to be transmitted on the gridÉHydro still won't let our customers buy the green power that the independents are offering us. Price is not the problem, access to the transmission system is."

IPPSO's Jake Brooks adds: "If Hydro is unwilling to carry through on its own sustainable development programme, then very likely sustainability will have to be mandated as it is in other jurisdictions. But it is always preferable to have a proponent do things voluntarily, rather than through direct regulation. Hydro's behaviour does not bode well for the voluntary approach."

Despite its termination of the RFP, Taylor claims Ontario Hydro will spend $14 million on other RETs programmes in 1997, even though the utility is under financial pressure from its failing nuclear programme. It recently said that shutdowns at its Pickering nuclear station would cost some $250 million in 1996.

Hostage to policy shifts

Meantime, the utility is supposedly installing a wind turbine for Ontario Place, a large and popular entertainment park near downtown Toronto (Windpower Monthly, January 1997). But even this turbine, expected to be a Tacke 600 kW, is hostage to unexpected policy shifts in Ontario Hydro's senior management. Jeannette Boyer, an adviser to Taylor on green energy choices, stresses the project is not yet committed, and is "fairly costly and somewhat risky." She adds the scheme -- part of a "green pricing pilot programme" designed to test consumers' interest in renewable energy projects in Ontario -- has been frozen within Ontario Hydro since January. Approximate costs to subscribers are believed to be in the range of $5 to $10 monthly. Financial backing has been promised from Natural Resources Canada, Toronto Hydro and Ontario Place.

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